> It seems like it's pretty hard for the government to compete with private industry in compensation. Federal pay grades are capped by Congress, and the top grade is around ~$150k a year [1]. And note that since it's the top of the scale, you have to start people off lower so that there is salary progression.

I feel like this has to be the biggest issue. When I worked in the DoD space as a constractor the amount of clearance required to work in an NSA SCIF would net a contractor a base of $160k a year (with benefits as you'd be working for a contracting company). With government employees making less to manage or do the same job as contractors, why would you stay on as a government employee? Most of the government employees I knew ended up transitioning to private companies.